Jim Healy Electrode Maker Finds Lots Of Business Overseas

It doesn’t take a political hot spot to inspire expansion plans for Lead-Lok Inc. It only looks that way.

“The next place we’ll be going is Northern Ireland for a joint venture with a company there,” said Lead-Lok President Jim Healy, whose 12-year-old company manufactures disposable electrodes used with electrocardiograph and fetal monitoring equipment.

In the past year, Lead-Lok has made deals for production facilities in Saudi Arabia, Cairo, Egypt, and Amman, Jordan.

The Sandpoint firm also holds a one-third partnership in a manufacturing plant scheduled to open in Zebo, China, this year. In other locations, Healy has opted to work on a royalty arrangement rather than forming a partnership.

“It depends on where it’s at,” he said. “I didn’t want a partnership in some place like Egypt - it’s too hard to keep an eye on the bottom line.

“In Saudi Arabia and other places,” he added, “I’d rather have the money up front.”

Lead-Lok has created a separate profit center under the original corporation in a subsidiary called Advanced Tech Machine. That firm engineers and builds the automation equipment to make disposable electrodes at expansion sites.

The expansion, however, has a built-in safety net in places like the Middle East. At those sites, Lead-Lok sells the automation equipment and takes a portion of future production profits.

“We haven’t put any money into them at all,” Healy said. “In Saudi Arabia, we sold the equipment at a profit. We have a royalty for perpetuity for every site we do. But even if we never made a penny on royalties, we still made money.”

Lead-Lok opened its first overseas production site in 1992, when it entered Poland at the front of the first wave of western investors coming into that country. Over the next five years, the Sandpoint firm bought out two partners to maintain full ownership in the plant.

“When I went into Poland, we were the only (foreign) company there,” Healy said. “You go over there now and they have everything - McDonald’s, skateboards, home breweries.

“You can no longer go to a developing country and offer something they haven’t seen before.”

Still, those countries roll out the welcome mat for investment dollars.

In Northern Ireland, Lead-Lok will have 25 percent of its initial investment and 40 percent of marketing costs covered by the government. The company will pay no taxes for three years and will receive a 50 percent tax cut for the following three years.

“They have a stigma,” Healy said. “People are afraid of that, so they offer incentives.”

Other international locations require investors to follow a unique learning curve.

In Poland, where Lead-Lok lost $14,000 during its first year of business at the new production facility in 1993, the government required payment of business-related debts at the end of the year.

“That’s something we’d never heard of,” Healy said. “In the U.S., you’d carry it over to the next year. But it’s actually kind of a good idea.”

If Poland’s attitude toward business negotiation was unbending, Healy found the Middle East to be positively pliable.

“In the Persian Gulf countries, they never stop negotiating,” he said. “Even after the deal is done, they call and ask ‘Can you cut the royalties? Will you pay my freight?”’

Growth is also taking place domestically. Earlier this month, Lead-Lok took a five-year lease on 5,000 square feet of space adjacent to its current manufacturing facility at Sandpoint’s city-owned airport industrial park. With total production and office space of about 14,000 square feet, the company plans to increase its staff of 30 employees by 10 new hires this summer.

The Sandpoint plant currently runs two shifts. Although Healy declined to discuss production numbers or sales totals, he predicts 1998 will be a year of significant financial growth.

In comparison, Healy recalled the company’s preautomation days.

“We were making electrodes by hand. “About 20 people produced 5,000 electrodes a day,” he said.

Lead-Lok’s first potential customer wanted to buy 120 million electrodes. Although the fledgling company couldn’t hope to fill the order, it prodded Healy toward a higherefficiency system.

“I calculated that if we had to fill that order the way we had been doing it, we’d need the entire population of Sandpoint and half of Coeur d’Alene,” he said.

Because 90 percent of the electrodes sold in the U.S. are purchased by hospitals, Lead-Lok is seeking entry to that market. Cost-containment efforts have forced individual hospitals to join buying groups. In response, Lead-Lok is considering a partnership with a Detroit medical products company to target hospital buying groups.

“We’d combine the two product lines, make a bigger catalog and put a person to work doing nothing but calling hospitals,” Healy said.

“But recognizing that the biggest opportunity for us is in expansion,” he continued, “I’m going to continue looking overseas.”

, DataTimes ILLUSTRATION: Photo